7 months ago • 2 mins
What’s going on here?
Carmaker Stellantis reported strong results on Wednesday – but it could soon be spinning its wheels.
What does this mean?
Let’s start with the good news: Stellantis, the auto giant behind brands like Fiat, Peugeot, and Jeep, managed to shift last year’s supply shortages into reverse last quarter, reporting a healthy 14% revenue boost that beat estimates. And the bad? The firm’s inventories have swelled to about 1.3 million cars, with production on the up just as a grim economic outlook’s dampening demand. In fact, Stellantis’ biggest market, North America, is facing a particularly bad inventory crunch, and that’s knocked its average selling prices in the region down for the first time in ten years. Clued-investors realized that spells trouble for the firm’s profit margins – and even Stellantis’ new share buyback program, worth almost $2 billion, couldn’t stop them speeding away.
Why should I care?
Zooming in: Pushing down and Porsching up.
Ford warned this week that carmakers might be forced to continue slashing prices. Higher production is one factor in that – and mid-range manufacturers seem to face the most risk now that Tesla’s price-cutting is snatching away their customers. For luxury players, that’s all hunky dory: with Tesla shifting downmarket, they can focus on the high-rollers whose deep pockets make price cuts less important. Just look at Aston Martin, whose average selling prices jumped 20% last quarter, or Porsche, which is raising prices after seeing red-hot demand for its fanciest models.
Zooming out: Less hiking, more driving.
Higher interest rates have been one of the things putting the squeeze on car purchases, but it looks like the hikes could now be reaching their final destination. See, the Federal Reserve hinted that Wednesday’s 0.25-percentage-point hike could be the final shot in its 14-month attack on inflation. And that might create fewer potholes for drivers’ demand to slip into.
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